Vanderbilt Law Review Volume 62 | Issue 3 Article 5 4-2009 The irC cle of Assent: How "Agreement" Can Save Mandatory Arbitration in Long-Term Care Contracts Lauren Gaffney Follow this and additional works at: https://scholarship.law.vanderbilt.edu/vlr Part of the Dispute Resolution and Arbitration Commons, and the Health Law and Policy Commons Recommended Citation Lauren Gaffney, The irC cle of Assent: How "Agreement" Can Save Mandatory Arbitration in Long-Term Care Contracts, 62 Vanderbilt Law Review 1017 (2019) Available at: https://scholarship.law.vanderbilt.edu/vlr/vol62/iss3/5 This Note is brought to you for free and open access by Scholarship@Vanderbilt Law. It has been accepted for inclusion in Vanderbilt Law Review by an authorized editor of Scholarship@Vanderbilt Law. For more information, please contact [email protected]. The Circle of Assent: How "Agreement" Can Save Mandatory Arbitration in Long-Term Care Contracts I. INTRODU CTION ................................................................... 1017 II. THE RISE OF ARBITRATION AGREEMENTS .......................... 1023 A. The Scope: Framingthe Issue of Mandatory A rbitration.............................................................. 1024 B. The FederalArbitration Act ................................... 1026 C. The Modern Era and the Long-Term Care Industry .......................................................... 1029 III. COMBATING COMPELLED ARBITRATION .............................. 1030 A. The First Line of Defense: Avoiding the FAA ......... 1030 B . Unconscionability................................................... 1033 C. The Power to Bind: Non-signatoryArguments ....................................... 1039 IV. PUTTING AGREEMENT BACK INTO ARBITRATION AGREEMENTS: THE CIRCLE OF ASSENT ........ 1042 A. Current State of Affairs .......................................... 1043 B. Solution: The Circle of Assent ................................ 1045 1. Readability, Length, Headings ................... 1047 2. Consumer Sophistication ............................ 1048 3. Conditions Surrounding Consent ................ 1048 4. Substantive Fairness ................................... 1049 5. Predictability of Provision ........................... 1051 V . C ON CLU SION ............................................................................. 1051 I. INTRODUCTION On September 28, 1997, a resident at the Comanche Trail Nursing Center physically attacked his eighty-one-year-old roommate, Tranquilino Mendoza.1 As a result of the attack, Mr. Mendoza suffered 1. Casas v. Paradez, No. 04-06-00417-CV, 2007 WL 2479602, at *3 (Tex. App. Sept. 5, 2007), opinion withdrawn and superseded on rehearingby Casas v. Paradez, 267 S.W.3d 170, 177 1017 1018 VANDERBILT LAW REVIEW [Vol. 62:3:1017 a concussion and brain damage. 2 His daughter claimed that her father was never the same after the attack and filed a lawsuit against the long-term care facility alleging negligence. 3 In 2006, a jury awarded 4 Mr. Mendoza $160 million. Similarly, on April 26, 2003, a resident of the Heritage House Nursing and Rehabilitation Center allegedly attacked Carolyn Mason, another resident at the same facility. 5 Mrs. Mason suffered a broken hip. 6 Like Mr. Mendoza, she filed a lawsuit against the long-term care facility alleging negligence. 7 But instead of proceeding toward trial, Heritage House produced Mrs. Mason's seven-page admission agreement and moved to compel arbitration.8 Apparently unbeknownst to Mrs. Mason, pages five and six of the admission contract required that "any legal dispute which might arise shall be resolved exclusively by binding arbitration."9 Four years after the attack, the Mississippi Court of Appeals upheld the arbitration clause, thereby preventing Mrs. Mason from taking her case to trial. 10 As a result, Mrs. Mason will argue her case in front of an arbitration panel rather than a judge and jury. If Mrs. Mason experienced abuse or neglect at Heritage House, a jury never will hear about it-she waived that right, which otherwise is guaranteed by the Constitution.1 Additionally, the public never will learn the outcome of (Tex. App. 2008). Upon entering judgment, however, the trial court applied a statutory damages cap reducing the award considerably. Id. at 178. 2. Id. at 177. 3. Id. 4. Id. at 178. The trial court reduced the judgment pursuant to statutory damage caps, but Mr. Mendoza's estate was nevertheless awarded over $10 million. Natalie White, Top 10 Jury Verdicts of 2006, LAW. WKLY., http://www.lawyersusaonline.com/2topten2OO6.cfm (last visited Nov. 2, 2007). The $160 million jury award was the second largest verdict in the United States in 2006. Id. 5. Cmty. Care Ctr. of Vicksburg v. Mason, 966 So. 2d 220, 223-24 (Miss. Ct. App. 2007). 6. Id. at 224. 7. Id. 8. Id. at 223, 226-27. 9. Id. at 223 (internal quotation marks omitted). 10. Id. at 231. 11. See Jean R. Sternlight, In Defense of Mandatory Binding Arbitration (If Imposed on the Company), 8 NEV. L.J. 82, 95 (2007) (discussing the fact that the Seventh Amendment to the U.S. Constitution guarantees disputants the right to a jury trial in certain situations). Interestingly, the California Supreme Court has responded to this issue by holding that a pre-dispute contractual waiver to a jury trial is not enforceable in a civil action in California. Avoiding a jury trial, however, is still possible through an arbitration agreement with legally enforceable provisions. See, e.g., Grafton v. Superior Court, 116 P.3d 479, 490, 492 (Cal. 2005) (distinguishing pre-dispute contractual waivers of a jury trial and arbitration agreements). 20091 THE CIRCLE OF ASSENT 1019 her case12 because arbitration is generally confidential.13 Perhaps of greatest importance, Mrs. Mason lost her most valuable tools for negotiating a settlement. Because Heritage House has no reason to fear the unknown factors that play into a jury verdict, any settlement likely will be limited to compensatory damages. 14 Further, damages often are capped contractually in arbitration agreements, and if they are not capped, they are generally very low for the elderly and disabled long-term care population. 15 Finally, there is at least the suspicion that industry-wide arbitration tends to favor the repeat players-here the nursing homes-because arbitrators want future case referrals. 16 The plight of Mrs. Mason is not uncommon. Mandatory pre- dispute arbitration agreements are the emerging standard in long- term care ("LTC") admission contracts all around the country. The agreements are "mandatory" because arbitration is the only form of dispute resolution available to an aggrieved LTC resident when a claim arises. This form of arbitration agreement is "pre-dispute" because the resident/signer agrees to arbitrate any disputes that may arise between the parties in the future, rather than take those disputes to court. Pre-dispute arbitration agreements differ from post- dispute agreements, in which parties agree to arbitrate a specific 12. See John R. Gillespie, Jr. & Andrew Ulloa, Gillespie & Ulloa, The Nuts and Bolts of Nursing Home Arbitration Agreements, 10 Nursing Home Litig. Rep. (West) 2 (Sept. 14, 2007) (noting that confidentiality, at least for the LTC industry, is "[o]ne of the well-known advantages of arbitration"). 13. GEORGE W. KUNEY, THE ELEMENTS OF CONTRACT DRAFTING WITH QUESTIONS AND CLAUSES FOR CONSIDERATION 121 (2d ed. 2006). Arbitration is often appealing to long-term care facilities for this exact reason. In fact, arbitration gained momentum in the early 1980s because it was "considered to be beneficial, featuring more privacy, less cost, and more speed than traditional litigation, and eliminating the wildcard decision-maker that is a civil jury." Id. 14. See id.: [T]he mere elimination of the jury is often enough to allow for early settlement of a dispute. Without a jury, the parties are faced with the cold, hard facts of their cases and the legal arguments involved, and have less incentive to roll the dice with a lay jury that may be swayed by theatrics, passion, rhetoric, and prejudice. 15. See, e.g., Suzanne Gallagher, Mandatory Arbitration Clauses in Nursing Home Admission Agreements: The Rights of Elders, 3 NAT'L AcAD. ELDER L. ATT'Ys J. 187, 198 (2007) (noting that arbitration agreements that cap damages are often upheld despite public policy arguments to the contrary). 16. See David S. Schwartz, Enforcing Small Print to Protect Big Business: Employee and Consumer Rights Claims in an Age of Compelled Arbitration, 1997 WiS. L. REV. 33, 60-62 (noting that "independent arbitration companies have an economic interest in being looked on kindly by large institutional corporate defendants who can bring repeat business"); see also Gillespie & Ulloa, supra note 12, at 2 (noting that courts in Florida are beginning to be "wary of agreements that appear to create a 'stacked deck' by designating a specific arbitrator or a very limited pool of potential arbitrators"). 1020 VANDERBILT LAW REVIEW [Vol. 62:3:1017 dispute after it has arisen. 17 This Note refers to mandatory pre- dispute arbitration agreements as "mandatory arbitration agreements." As mandatory arbitration agreements are discovered by consumers and claims arise,' 8 questions surrounding the legality and propriety of these agreements emerge. Critics of mandatory arbitration agreements in nursing home contracts urge that these provisions are intrinsically unfair. 19 Arbitration provisions in nursing home contracts generally deny the elderly and disabled the right